desert dude
Well-Known Member
I posted this the Washington legalizes marijuana thread, but I think it deserves its own thread.
"What is a rational price for pot?". The answer I expected was something like this: "Pot should be priced at a point where all involved are able to make a living at growing, processing, distributing and selling it."
In a free market, the most efficient production chain wins because it produces the most, and the best quality for the least cost. That is simple supply/demand economics. It is hard to put a precise dollar figure on it, but it is easy to put an approximate dollar figure on it.
Look at similar products, Tobacco for example. Tobacco is mostly grown by small family farmers in the US. They sell their Tobacco at auction in the early winter every year to the big Tobacco companies. The big Tobacco companies buy it at wholesale prices from the farmers and process it into cigarettes, cigars, snuff, etc.
In the summer of 1974 I was a field worker on my cousin's small Tobacco farm. I cut it and housed it in September, and "stripped" it in November. I think I was paid $2.00 per hour for my labor, I don't remember exactly, but it was a lot of work for little money. My cousin sold the Tobacco he raised to the big Tobacco companies for about $2.00 per pound and he was very pleased with that price. I doubt Tobacco sells for more than $4.00 per pound today at auction.
Using the price of Tobacco as a guide, I would expect marijuana to sell for about $5 to $20 per pound at the wholesale level, i.e. that is what a grower can expect to make when selling to a wholesaler. In a free market, I would expect each of the "handlers" in the supply chain to double the price. If this approximation is accurate, I would expect the retail buyer to pay $20 to $100 per pound for the finished product.
Now, let's get the gangsters involved:
1. the Washington state government apparently wants $10 per gram in taxes, that is their bite. This amounts to about $4,600 per pound in "sin taxes".
2. the cartel chain currently demands about half that amount (i.e. about $2,300) in risk premium under the current prohibition scheme. As usual, the "criminals" are more reasonable than the government.
My conclusions:
1. Any "legalization" scheme that makes the retail price attractive to the cartel will do very little to take down the cartels. This is why Unclebuck is so overjoyed at the Washington legalization initiative, it effectively raises the floor price on his treadmills. This is crony capitalism at its finest.
2. An "honest" price for high grade retail marijuana is probably about $100 per pound.
3. If you tack on an "honest" tax, that might raise the retail price to $200 per pound.
"What is a rational price for pot?". The answer I expected was something like this: "Pot should be priced at a point where all involved are able to make a living at growing, processing, distributing and selling it."
In a free market, the most efficient production chain wins because it produces the most, and the best quality for the least cost. That is simple supply/demand economics. It is hard to put a precise dollar figure on it, but it is easy to put an approximate dollar figure on it.
Look at similar products, Tobacco for example. Tobacco is mostly grown by small family farmers in the US. They sell their Tobacco at auction in the early winter every year to the big Tobacco companies. The big Tobacco companies buy it at wholesale prices from the farmers and process it into cigarettes, cigars, snuff, etc.
In the summer of 1974 I was a field worker on my cousin's small Tobacco farm. I cut it and housed it in September, and "stripped" it in November. I think I was paid $2.00 per hour for my labor, I don't remember exactly, but it was a lot of work for little money. My cousin sold the Tobacco he raised to the big Tobacco companies for about $2.00 per pound and he was very pleased with that price. I doubt Tobacco sells for more than $4.00 per pound today at auction.
Using the price of Tobacco as a guide, I would expect marijuana to sell for about $5 to $20 per pound at the wholesale level, i.e. that is what a grower can expect to make when selling to a wholesaler. In a free market, I would expect each of the "handlers" in the supply chain to double the price. If this approximation is accurate, I would expect the retail buyer to pay $20 to $100 per pound for the finished product.
Now, let's get the gangsters involved:
1. the Washington state government apparently wants $10 per gram in taxes, that is their bite. This amounts to about $4,600 per pound in "sin taxes".
2. the cartel chain currently demands about half that amount (i.e. about $2,300) in risk premium under the current prohibition scheme. As usual, the "criminals" are more reasonable than the government.
My conclusions:
1. Any "legalization" scheme that makes the retail price attractive to the cartel will do very little to take down the cartels. This is why Unclebuck is so overjoyed at the Washington legalization initiative, it effectively raises the floor price on his treadmills. This is crony capitalism at its finest.
2. An "honest" price for high grade retail marijuana is probably about $100 per pound.
3. If you tack on an "honest" tax, that might raise the retail price to $200 per pound.
